As the day of its expected initial public offering approaches, search giant Google has settled two outstanding disputes with portal rival Yahoo The settlement calls for Google to issue 2.7 million class A shares, which will be worth around $328 million if Google’s stock prices at the mid-point of its expected range.
“We are pleased to have resolved these issues and with the terms of the agreement,” said Steve Langdon, a Google spokesperson. A Yahoo representative expressed a similar sentiment.
Google says it will have to take a one-time charge of between $260 million and $290 million in the third-quarter to account for the settlement. That will, the company says, result in its reporting a net loss for the quarter.
The most substantial issue laid to rest was a patent dispute over the business model and technology behind Google’s AdWords program — by far the largest contributor to Google’s revenues.
Overture Services, now owned by Yahoo, filed suit against Google in April of 2002 alleging that Google infringed on U.S. Patent No. 6,269,361, “System and method for influencing a position on a search result list generated by a computer network search engine.” Overture’s patent protects bid-for-placement products as well as Overture’s DirecTraffic Center account management system and tools. Google maintained the patent was “invalid and unenforceable.”
The settlement reached today calls for Overture to dismiss the suit against Google and grant the rival firm a fully paid perpetual license to the patent, as well as to several related patent applications Overture holds. Google divulged these terms in an updated S1 filing with the Securities and Exchange Commission today.
The second dispute concerned the number of shares due under a branding and promotion agreement the two struck in June of 2000. In June 2003, Google says it issued around 1.2 million shares to Yahoo under the terms of the warrant agreement, while Yahoo contended it was entitled to more shares. Today’s settlement sets aside this disagreement, as well.
The issuance of shares brings Yahoo’s stake in Google up to 8.2 million shares, worth about $996.3 million if Google’s stock prices at the mid-point of its range. Previously, Yahoo owned 5.5 million shares, worth an approximate $668.3 million.
Google is reportedly preparing to make its initial public offering in the next two weeks. Widespread reports citing unnamed sources had pegged the IPO for this week, but glitches are said to have pushed things back. Google has registered to sell 25.7 million shares at a price between $108 and $135 per share. The company is taking bids in a Dutch auction at ipo.google.com.
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